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Taro Provides Results for September 30, 2017

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November 7, 2017-- Taro Pharmaceutical Industries Ltd. (NYSE:TARO)
("Taro" or the "Company") today provided unaudited financial results for
the three and six months ended September 30, 2017.

Quarter ended September 30, 2017 Highlights - compared to September
30, 2016

  • Net sales of $169.9 million decreased $58.9 million, the result of
    continuing increased competition and the challenging pricing
    environment; despite a slight increase in volumes.
  • Gross profit of $125.1 million decreased $52.2 million, and as a
    percentage of net sales, was 73.6% compared to 77.5%.
  • Research and development (R&D) expenses increased $3.2 million to
    $18.0 million.
  • Selling, marketing, general and administrative expenses (SG&A)
    decreased $2.5 million to $18.3 million.
  • Operating income of $88.8 million decreased $52.8 million, or 52.3% of
    net sales compared to 61.9%.
  • Net Income was unfavorably impacted by a $46.0 million fluctuation in
    foreign exchange (FX) from income of $13.4 million in 2016 to an
    expense of $32.6 million in 2017, principally the result of the
    strength of the Canadian dollar vs. U.S. dollar.
  • Tax expense of $6.9 million decreased $28.7 million; with the
    effective tax rate of 11.5% compared to 22.3%.
  • Net income attributable to Taro was $52.4 million compared to $123.7
    million, a $71.3 million decrease, resulting in diluted earnings per
    share of $1.30 compared to $3.00.

Six Months ended September 30, 2017 Highlights - compared to
September 30, 2016

  • Net sales of $331.2 million decreased $131.3 million, the result of
    continuing increased competition and the challenging pricing
    environment; despite an increase in volumes.
  • Gross profit of $241.7 million decreased $118.4 million, and as a
    percentage of net sales, was 73.0% compared to 77.8%.
  • R&D expenses of $32.7 million remained in line with prior year
    expenses with all of our activities, including clinical studies,
    proceeding according to plan.
  • SG&A remained relatively flat at $42.6 million.
  • Operating income of $166.4 million decreased $117.8 million, or 50.2%
    of net sales compared to 61.4%.
  • Net Income was unfavorably impacted by a $59.7 million fluctuation in
    FX from income of $7.5 million in 2016 to an expense of $52.2 million
    in 2017, principally the result of the strength of the Canadian dollar
    vs. U.S. dollar.
  • Tax expense of $16.9 million decreased $49.1 million; with the
    effective tax rate of 13.6% compared to 22.0%.
  • Net income attributable to Taro was $106.9 million compared to $233.6
    million, a $126.7 million decrease, resulting in diluted earnings per
    share of $2.65 compared to $5.59.

Mr. Uday Baldota, Taro's CEO stated, "We continue to navigate the
current industry challenges − increased competitive intensity, pressures
from buying consortiums, and higher ANDA approval rates from the FDA. In
order to deliver long-term performance and a quality pipeline of
products, we continue our investment in R&D. In addition, given our
strong cash position, we will continue to explore and evaluate business
development opportunities that meet both our operational and financial
targets."

Cash Flow and Balance Sheet Highlights

  • Cash flow provided by operations for the six months ended September
    30, 2017, was $138.7 million compared to $192.7 million for the six
    months ended September 30, 2016.
  • As of September 30, 2017, cash, including short-term bank deposits and
    marketable securities (both short and long-term), increased $83.3
    million to $1.5 billion from March 31, 2017. Cash reflects the $40.4
    million impact from the Company's share repurchases.

FDA Approvals and Filings

The Company recently received approval from the U.S. Food and Drug
Administration ("FDA") for the Abbreviated New Drug Application ("ANDA")
Dapsone Gel, 5%. The Company currently has a total of thirty-two ANDAs
awaiting FDA approval, including five tentative approvals.

Company's Office Holders Compensation Policy

On February 9, 2017, the Taro Board of Directors (the "Board"), based on
the recommendation of the Compensation Committee of the Board, and in
accordance with Section 276A(c) of the Companies Law, approved a renewed
version of the Company's Office Holders Compensation Policy (the
"Policy"). Such approval made the Policy effective until it could be
reconsidered by Taro's shareholders at the 2017 Annual General Meeting
of Shareholders.

On November 7, 2017, the Board elected, with Taro's Compensation
Committee recommendation, to extend its approval of the Policy until the
2018 Annual General Meeting of Shareholders in order to permit
additional time to address feedback from various stakeholders.

Share Repurchase Program - Returning Capital to
Shareholders

On November 23, 2016, the Company announced that its Board of Directors
approved a $250 million share repurchase of ordinary shares. Under this
authorization, repurchases may be made from time to time at the
Company's discretion, based on ongoing assessments of the capital needs
of the business, the market price of its stock, and general market
conditions. The repurchase authorization enables the Company to purchase
its ordinary shares from time to time through open market purchases,
negotiated transactions or other means, including 10b5-1 trading plans
in accordance with applicable securities laws or other restrictions.
During the current fiscal year, through October 31, 2017, the Company
has repurchased 410,664 shares at an average price of $103.79. Under
this program, in total, the Company has repurchased 929,629 shares, with
$153.1 million remaining under the authorization. On November 7, 2017,
the Board extended the share repurchase program for one year.

Earnings Call (8:00 am EST,
November 8, 2017)

As previously announced, the Company will host an earnings call at 8:00
am EST on Wednesday, November 8, 2017, where senior management will
discuss the Company's performance and answer questions from
participants. This call will be accessible through an audio dial-in and
a web-cast. Audio conference participants can dial-in on the numbers
below:

  • Participant Toll-Free Dial-In Number: +1 (844) 421-0601 ID: 4298818
  • Participant International Dial-In Number: +1 (716) 247-5800 ID: 4298818
  • Audio web-cast: Details are provided on our website, www.taro.com

To participate in the audio call, please dial the numbers provided above
five to ten minutes ahead of the scheduled start time. The operator will
provide instructions on asking questions before the call. The transcript
of the event will be available on the Company's website at www.taro.com.

The Company cautions that the foregoing financial information is
presented on an unaudited basis and is subject to change.

About Taro

Taro Pharmaceutical Industries Ltd. is a multinational, science-based
pharmaceutical company, dedicated to meeting the needs of its customers
through the discovery, development, manufacturing and marketing of the
highest quality healthcare products. For further information on Taro
Pharmaceutical Industries Ltd., please visit the Company's website at www.taro.com.

SAFE HARBOR STATEMENT

The unaudited consolidated financial statements have been prepared on
the same basis as the annual consolidated financial statements and, in
the opinion of management, reflect all adjustments necessary to present
fairly the financial condition and results of operations of the Company.

The unaudited consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements
included in the Company's Annual Report on Form 20-F, as filed with the
SEC.

Certain statements in this release are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995.
These statements include, but are not limited to,
statements that do not describe historical facts or that refer or relate
to events or circumstances the Company "estimates," "believes," or
"expects" to happen or similar language, and statements with respect to
the Company's financial performance, availability of financial
information, and estimates of financial results and information for
fiscal year 2018.
Although the Company believes the expectations
reflected in such forward-looking statements to be based on reasonable
assumptions, it can give no assurances that its expectations will be
attained.
Factors that could cause actual results to differ
include general domestic and international economic conditions, industry
and market conditions, changes in the Company's financial position,
litigation brought by any party in any court in Israel, the United
States, or any country in which Taro operates, regulatory and
legislative actions in the countries in which Taro operates, and other
risks detailed from time to time in the Company's SEC reports, including
its Annual Reports on Form 20-F.
Forward-looking statements are
applicable only as of the date on which they are made.
The
Company undertakes no obligations to update, change or revise any
forward-looking statement, whether as a result of new information,
additional or subsequent developments or otherwise.

**Financial Tables Follow**

           
TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(U.S. dollars in thousands, except share data)
 
Quarter Ended Six Months Ended
September 30, September 30,

2017

2016

2017

2016

Sales, net $ 169,915 $ 228,794 $ 331,236 $ 462,578
Cost of sales 44,795 51,428 89,573 102,313
Impairment       76         184  
Gross profit 125,120 177,290 241,663 360,081
 
Operating Expenses:
Research and development 17,995 14,845 32,653 32,765
Selling, marketing, general and administrative   18,342     20,886     42,591     43,137  
Operating income 88,783 141,559 166,419 284,179
 
Financial (income) expense, net:
Interest and other financial income (4,602 ) (3,546 ) (9,078 ) (6,853 )
Foreign exchange expense (income) 32,583 (13,375 ) 52,225 (7,465 )
Other (loss) gain, net   (1,310 )   1,054     808     1,457  
Income before income taxes 59,492 159,534 124,080 299,954
Tax expense   6,864     35,558     16,851     65,984  
Income from continuing operations 52,628 123,976 107,229 233,970
Net loss from discontinued operations attributable to Taro   (145 )   (76 )   (192 )   (177 )
Net income 52,483 123,900 107,037 233,793
Net income attributable to non-controlling interest   90     243     147     240  
Net income attributable to Taro $ 52,393   $ 123,657   $ 106,890   $ 233,553  
 
Net income per ordinary share from continuing operations
attributable to Taro:
Basic and Diluted $ 1.30   $ 3.00   $ 2.65   $ 5.59  
 
Net loss per ordinary share from discontinued operations
attributable to Taro:
Basic and Diluted $ (0.00 ) * $ (0.00 ) * $ (0.00 ) * $ (0.00 ) *
 
Net income per ordinary share attributable to Taro:

Basic and Diluted

$ 1.30   $ 3.00   $ 2.65   $ 5.59  
 
Weighted-average number of shares used to compute net income per
share:
Basic and Diluted   40,315,991     41,300,387     40,402,257     41,832,592  
 
* Amount is less than $0.01
May not foot due to rounding.
 
 
TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
         
September 30, March 31,
2017 2017
ASSETS (unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalents $ 503,321 $ 600,399
Short-term and current maturities of long-term bank deposits 556,121 782,813
Marketable securities 339,444 3,548
Accounts receivable and other:
Trade, net 201,710 203,924
Other receivables and prepaid expenses 176,298 266,280
Inventories 150,191 141,045
Long-term assets held for sale, net     1,015
TOTAL CURRENT ASSETS 1,927,085 1,999,024
Long-term deposits and marketable securities 141,887 70,685
Property, plant and equipment, net 187,937 180,085
Deferred income taxes 125,597 10,324
Other assets   31,311   29,635
TOTAL ASSETS $ 2,413,817 $ 2,289,753
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables and other current liabilities $ 201,546 $ 209,837
TOTAL CURRENT LIABILITIES 201,546 209,837
Deferred taxes and other long-term liabilities   4,770   6,110
TOTAL LIABILITIES 206,316 215,947
 
Taro shareholders' equity 2,201,042 2,067,494
Non-controlling interest   6,459   6,312
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,413,817 $ 2,289,753
 
 
TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in thousands)
         
Six Months Ended September 30,
2017 2016
Cash flows from operating activities:
Net income $ 107,037 $ 233,793
Adjustments required to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,794 7,397
Impairment for long-lived assets 184
Realized loss (gain) on sale of marketable securities and long-lived
assets
125 (5 )
Change in derivative instruments, net (4,388 ) 2,337
Effect of change in exchange rate on inter-company balances and bank
deposits
61,564 (9,034 )
Deferred income taxes, net 15,813 (11,422 )
Decrease (increase) in trade receivables, net 2,866 (11,285 )
Increase in inventories, net (5,986 ) (11,611 )
(Increase) decrease in other receivables, income tax receivable,
prepaid expenses and other
(37,359 ) 13,054
Decrease in trade, income tax, accrued expenses, and other payables (7,339 ) (20,731 )
Income from marketable securities   (1,430 )    
Net cash provided by operating activities   138,697     192,677  
 
Cash flows from investing activities:
Purchase of plant, property & equipment, net (11,809 ) (19,238 )
Investment in other intangible assets (1,554 ) (22 )
Proceeds from short-term bank deposits 221,851 138,344
Proceeds from (investment in) long-term deposits and other assets 75,528 (281,792 )
(Investment in) proceeds from marketable securities, net   (481,592 )   80  
Net cash used in investing activities   (197,576 )   (162,628 )
 
Cash flows from financing activities:
Purchase of treasury stock   (40,417 )   (240,618 )
Net cash used in financing activities   (40,417 )   (240,618 )
 
Effect of exchange rate changes on cash and cash equivalents   2,218     (550 )
Decrease in cash and cash equivalents (97,078 ) (211,119 )
Cash and cash equivalents at beginning of period   600,399     576,757  
Cash and cash equivalents at end of period $ 503,321   $ 365,638  
 
Cash Paid during the year for:
Income taxes $ 40,183   $ 57,703  
Non-cash investing transactions:
Purchase of property, plant and equipment included in accounts
payable
$ 735   $ 1,272  
 

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